ExxonMobil and Chevron avoid Paris-alignment resolutions over technicality
Procedural delay means oil majors off the hook as SEC concurs there is basis for exclusion
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ExxonMobil and Chevron have managed to avoid resolutions on alignment with the Paris climate accord that were filed by Dutch green shareholder group Follow This due to a technicality.
The resolutions stated that the companies have shareholder support to align their strategies with the Paris Agreement, meaning such strategies should cover emissions of their energy products (Scope 3) and include annual reporting on progress made.
ExxonMobil’s law firm Davis Polk argued there was a two-day delay in showing proof that Follow This owned its shares. “The proof of ownership was not timely received,” it said in a letter to the Securities and Exchange Commission.
ExxonMobil argued that such a proof by Follow This’s broker BinckBank was not sufficient under SEC rules.
“The proof of ownership was not timely received.” - ExxonMobil
According to ExxonMobil, the Depository Trust Company (DTC) provider should have also offered proof within 14 calendar days (by January 1, 2020). ExxonMobil acknowledged receipt from Pershing, the DTC provider, on January 3.
In its rebuttal letter to the SEC, seen by Responsible Investor, Follow This argued that it is also within the SEC’s criteria to “forgo an overly technical reading of ownership requirements”.
This interpretation aims at preventing “companies from using such technicalities to exclude proposals…in a manner which compromises interests of justice.”
Follow This also argued that there is a basis to extend deadlines, particularly in the present case, when the 14-day period “fell over the December Holidays (Christmas Eve, Christmas Day and New Years)”.
Follow This added that they were in regular email communication with the companies during the 14-day period and that, in the meantime, provisional proof was offered until Pershing provided the requested documents.
Similar arguments were used by Chevron, which also argued that the resolution should be excluded based on the micromanagement exception.
Law firm Gibson Dunn said the nature of the proposal was “prescriptive” and that “impermissibly seeks to micromanage the Company by seeking to impose a specific method for implementing complex policies in place”.
It added: “It dictates the particular strategy to be implemented.”
Follow This counter-argued that the resolution intentionally referred to “setting a strategy” instead of concrete targets to allow ExxonMobil and Chevron a greater degree of autonomy to meet the goals set out in the Paris Agreement.
The letter, co-signed by Follow This associate McKenzie Ursch, stated: “The proposal merely puts forth climate policy congruent with scientific consensus, namely […] that companies should take all emissions (scope 1, 2, and 3) into account. If this language is deemed too prescriptive, it precludes the Company from aligning their climate strategy with accepted scientific consensus.”
Unlike some of their European peers, the American oil majors have so far not pledged to reduce scope 3 emissions. The resolutions filed by Follow This at ExxonMobil and Chevron are in line with those filed at Shell, BP and Equinor.
The pressure group’s founder Mark van Baal said: "With or without a climate resolution on the ballot, ExxonMobil and Chevron can look forward to a heated AGM in May. Their refusal to take responsibility for climate action will not stand."